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Purpose – This paper aims to examine whether capital market rewards firms with good corporate sustainability practices in an international setting by using the Dow Jones Sustainability Index (DJSI hereafter) as an integrated measure of firm sustainability performance. Design/methodology/approach – There are two alternative theories regarding the impact of sustainability on firm value. The value-creating theory predicts that integration of environmental and social responsibility into corporate strategies and practices reduces firm risk and promotes long-term value creation. The value-destroying theory on sustainability suggests that managers may engage in socially responsible activities at the expense of shareholders. To perform empirical tests, we use a large international sample for a period of 13 years between 1999 (the first year when DJSI became available) and 2011. To control for self-selection bias and simultaneity, the authors use lagged values of sustainability performance in a robustness check. Findings – The authors find a positive relation between sustainability performance and firm value, after controlling for variables that have been found to affect firm value in the existing literature. The test results are consistent with the value enhancing theory (as opposed to the shareholder expense theory) regarding the role of sustainability engagement in firm valuation. Furthermore, the positive impact of sustainability engagement on firm value is primarily driven by countries with strong investor protection and with high disclosure levels. Research limitations/implications – A positive impact of sustainability performance on firm value supports the value-creating theory and rejects the value-destroying theory. Test results also suggest a more pronounced market response to corporate sustainability in countries with stronger shareholders protection and higher requirement for financial transparency. Practical implications – Given the growing international capital market and intensifying global competition, the valuation implications of sustainability in an international context is of practical interest to management, investors and regulators worldwide. Originality/value – First, it is an initial attempt to test an integrated measure of the “triple-bottom-line” definition of sustainability in an international setting. Second, our paper studies the international variation in market valuation of firm sustainability performance in terms of the value enhancing versus shareholder expense theories on sustainability. The authors explore the relevance of sustainability performance in relation to the investor protection and the reporting environment across countries.

Purpose – This paper aims to provide an update to the risk management literature, as it compiles a survey of 65 recent theoretical and empirical studies on the topic. Design/methodology/approach – This is a survey paper that summarizes recent theoretical and empirical research regarding the relationship between risk management and firm value. Findings – Recent empirical evidence provides support for theoretical propositions in the literature that risk management increases firm value and returns, while reducing return and cash flow volatility. The results are largely consistent with early findings, and there have been significant empirical advances that address concerns regarding the endogeneity of risk management practices relative to corporate financial decisions. The literature has become broader and deeper, as there are now studies with larger sample sizes across more industries and geographic areas. Practical implications – Firms that use sound risk management practices obtain higher valuations, achieve better financial performance and experience diminished costs of financial distress. Recent research has emerged regarding enterprise risk management and its potential for value creation and risk reduction. Originality/value – The paper provides a new compilation and synthesis of recent theoretical and empirical research in risk management that addresses many of the limitations of prior research.

Purpose – The purpose of this paper is to investigate the relationship between corporate governance and firm performance by conducting a meta-analysis of 25 previous studies. The analysis has three specific concerns, i.e. the moderating effects of legal systems (common law or civil law), governance mechanisms (external or both external and internal governance together) and performance measures (accounting or market value). Design/methodology/approach – The methodology used is the meta-analysis technique developed by Hunter et al. (1982). Findings – The findings show that the external governance mechanisms measured by anti-takeover provisions and market value of firm performance measured by Tobin’s Q and market to book value are the key moderators of this relationship. Practical implications – This paper has important implications for regulators and directors by proposing external governance to be an influential factor of firm performance. This paper is also of interest to the investors and companies by highlighting the significant relationship between corporate governance and market value of the firm. Originality/value – As the author finds that the external governance mechanism (anti-takeover provisions) exerts more influential effect on firm performance than both external and internal governance together, this research confirms the imperative for external governance to increase the firm value.

Purpose – The purpose of this paper is to investigate the effect of corporate governance and ownership structures on earnings quality in China both prior and subsequent to two important corporate reforms: the code of corporate governance (CCG) in 2002 and the split share structure reform (SSR) in 2005. Design/methodology/approach – This study utilises informativeness of earnings (earnings response coefficient), conditional accounting conservatism and managerial discretionary accruals to assess earnings quality using 12,267 firm-year observations over 11 years from 2000 to 2010. Further, two dummy variables for measuring the changes of CCG and SSR are employed to estimate the effects of CCG and SSR reforms on earnings quality via OLS regression. Findings – This study finds that the promulgation of the CCG in 2002 has had a positive impact, but the SSR reform in 2005 has had little effect on listed firms’ earnings quality in China. These results hold good after controlling for a number of ownership, governance and other variables and estimating models with multiple measures of earnings’ quality. Research limitations/implications – Future research could focus on how western style corporate governance mechanisms have been constrained by the old management systems and governmental dominated ownership structures in Chinese listed firms. The conclusion is that simply coping Western corporate governance model is not suitable for every country. Practical implications – The results will assist Chinese regulators in improving reporting quality, ownership structure and governance mechanisms in China. The results will help international investors better understand quality of financial information in China. Originality/value – This is the first to our knowledge that addresses the effects of major governance and ownership reforms together on accounting earnings quality and, thus, makes a significant contribution on understanding the effect of regulatory reforms on improving earnings quality. In doing so, it also indirectly assesses the effectiveness of western-style corporate governance mechanisms introduced in China.

Purpose – The purpose of this paper is to understand the impact of tenure on earnings management. Design/methodology/approach – Analytical model; multivariate regression analysis. Findings – The paper predicts that managers are conservative in managing earnings when they first start to take top managerial positions, and then become aggressive in the next few years. Once they reach the maximum level of earnings management, they will become conservative again and report earnings less aggressively. This inverted U-shaped relationship between tenure and earnings management is confirmed by the data from the Chinese stock market. Research limitations/implications – It is based on China stock market data. Generalization of the research results to other countries is limited. Practical implications – With the knowledge of when earnings management is more likely to occur, regulators can set up policies targeting firms and managers with certain characteristics, instead of requiring observances from all firms and managers. This limited scope can greatly reduce the costs of preventing and identifying earnings management, while effectively maintaining the quality of earnings in the meantime. Social implications – This paper examines the earnings management behavior related to CEO tenure. It is hoped that the research results can improve the overall understanding of earnings management, then social wealth spent on preventing and identifying it could be reduced. Originality/value – It is an original work.

Purpose – This study aims to explore the relation between the qualities of the information system (IS), management accounting adaptability (MAA) and its effectiveness. Design/methodology/approach – This study involves the development and empirical testing of a model where the qualities of the IS and management accounting effectiveness (MAE) are mediated by MAA. Findings – Information system flexibility (ISF) and shared knowledge had a significant and positive relation to MAA, which in turn had a positive and significant relation to MAE. There was also a moderation effect of ISF on the relation between IS integration and MAA. Research limitations/implications – IS integration in itself may not lead to management accounting stability, but it is the lack of flexibility of the system and lack of cooperation between the stakeholders that might lead to its stagnation. Practical implications – Organizations are advised to implement solutions that are relatively flexible and modular, as well as encourage cooperation between stakeholders to fully leverage and improve the existing system. Originality/value – The study extends the discourse on the interaction between management accounting and ISs by exploring the role of a number of factors that drive MAA.

Purpose – The purpose of this paper is to investigate how and why information systems (IS) enhance firm performance (FP) from a knowledge management perspective. Drawing upon the knowledge-view of the firm and organizational learning theories, we develop and empirically test a theoretical model where knowledge sharing (KS) plays a mediating role between IS maturity (ISM) and FP. Design/methodology/approach – Data were collected through a survey of business managers in China. The model was tested by using the partial least squares structural equation modeling approach. Findings – The results provide support for the propose research model and confirm that ISM is positively associated with FP, and KS partially mediates the effects of ISM. Originality/value – This study contributes to the IS literature by reconceptualizing the ISM construct and testing the mediating effect of KS and, thus, offers some answers to the “how-and-why” question about the value of IS.

Purpose – The main purposes of this paper are to provide evidence about corporate failure diagnosis in SMEs, identify the predictor variables that enhance the accuracy of the corporate failure diagnosis models, and perform comparative analysis of the proposed models with the existing literature. The paper supports the proposition that the majority of the proposed corporate failure diagnosis models in the literature exhibit an endogenous drawback since their construction is based on large entities or listed corporations' samples. Design/methodology/approach – The present study employs multiple discriminant analysis, logit analysis, and probit analysis to construct corporate failure diagnosis models based on SMEs longitudinal data from Greece. Findings – The paper provides evidence that the contribution of human capital is immensely more important to the viability of SMEs than to the viability of large corporations. Moreover, this study identifies interactions among seemingly insignificant variables that exhibit incremental information content and attribute massive discriminant power to the proposed corporate failure diagnosis models. Practical implications – The results of this study encourage regulatory authorities to adopt enhancements to the Basel II framework and financial institutions as regards to constructing their corporate failure diagnosis models. The models is based upon internal default experience and mapping to external data incorporating both quantitative and qualitative variables. Originality/value – The contribution of this paper is the proposition of new value-relevant variables that enhance the accuracy of existing corporate failure diagnosis models for SMEs.

Purpose – The purpose of this paper is to empirically investigate the influence of several firm-specific characteristics on the extent of voluntary disclosure in eXtensible business reporting language (XBRL). Design/methodology/approach – A disclosure checklist consisting of 54 financial and non-financial items in XBRL format is developed to examine the extent of voluntary disclosure in the 2008 annual reports of 51 US listed firms. Findings – The results show that firm size and firms' level of innovativeness are significantly and positively related to the extent of overall disclosures. Research limitations/implications – There are, however, several limitations in the study. First, a relatively small sample size of 51 firms from the year 2008. Second, the construction of an unweighted disclosure index based on the elements, which were voluntarily disclosed, may not be the best measurement. It might be interesting to replicate this study based on a larger sample size from another voluntary filing program. Originality/value – The findings of this study should be of interest to firms that prepare, “clients” that use and regulators that monitor financial reporting disclosures in XBRL.

Purpose – The purpose of this paper is to provide empirical evidence concerning: the relationships between decentralization, perceived environmental uncertainty, and management accounting systems (MAS) information and the relationships between MAS information and managerial performance within Egyptian hospitals. Design/methodology/approach – Data were collected using questionnaires that were sent personally to the managers or heads of departments of Egyptian hospitals. Departmental level was used as the unit of analysis. Data obtained from 200 hospital managers were analyzed using partial least squares. Findings – The study reveals that decentralization and environmental uncertainty, to some extent, are essential factors in designing efficient and effective MAS. Hospitals with decentralized structure make better use of timely, aggregated and integrated MAS information. Environment in which the hospitals operate does have significant influence on the type of information provided by the MAS. Research limitations/implications – Using personally administered questionnaires causes the sample to be rather limited and not comprehensive enough. Practical implications – The current study offers the hospital managers some useful aspects related to the function of MAS information that can be used to enhance their managerial performance. The provision of broad-scope and timeliness of MAS information can facilitate more effective managerial decisions. MAS designers and Egyptian policy makers should emphasize on decentralized decision-making by delegating sufficient authority to lower level managers as much as possible. Originality/value – This study is one of the few studies done in Africa in the field of MAS, particularly in the context of Egyptian hospitals.